Source - Alliance News

Baronsmead Venture Trust PLC on Tuesday said its net asset value fell from both six months and a year ago, as also reported by Baronsmead Second Venture Trust PLC, with both citing a turbulent macroeconomic environment in the UK as affecting performance of their portfolios.

Baronsmead and Baronsmead Second Venture are both investment firms focused on early-stage UK companies.

For Baronsmead, NAV per share at March 31 was 57.96 pence, down5.4% from 61.29p on September 30 and down 18% from 70.37p a year earlier.

Shares in Baronsmead were down 2.7% to 54.00p each in London on Tuesday afternoon.

This was despite narrowing pretax loss to £2.4 million in the six months that ended March 31 from £25.0 million a year earlier, as the number of ordinary shares in circulation increased to 350.9 million from 316.5 million over the same period.

Total net assets also fell 8.7% to £203.4 million from £222.7 million.

However, it noted NAV per share improved 1.9% to 59.1p on May 31 from March 31, driven by firmer quoted markets and further increases in the value of the company’s listed investments.

Over what has been a turbulent six months, the company’s net asset value declined slightly... Continued weakness in the value of the company’s unquoted investments was largely although not completely offset by the modestly positive performance of the listed portfolio,‘ said Chair Fiona Miller Smith.

‘[This] highlights the benefits of the company’s investment policy of having a combination of unquoted and listed assets with the aim of providing a more consistent total return to shareholders over the medium to long term.

Miller Smith also noted high UK inflation during the half-year period, alongside steadily rising interests.

‘Consequently, UK economic conditions continued to be challenging and this has generated much uncertainty across the financial markets. This was compounded in the first quarter of 2023 by the collapses of Silicon Valley Bank and Credit Suisse in close succession which led to fears of a more widespread banking sector contagion,’ Miller Smith continued.

Looking ahead, Miller Smith stressed that the investment manager continued to believe that the ‘fundamentals of the underlying portfolio companies remain robust and the growth prospects for the majority of investee companies continue to be positive over the medium term’.

For Baronsmead Second Venture, NAV per share at March 31 was 61.0p, down 6.3% from 65.1p on September 30 and down 18% from 74.2p a year earlier.

Shares in Baronsmead Second Venture were down 3.4% to 57.00p each in London on Tuesday afternoon.

This was also despite pretax loss narrowing to £3.8 million in the six months that ended March 31 from £29.9 million a year earlier, as like Baronsmead, the number of Baronsmead Second Venture shares in circulation also rose 5.5% to 345.6 million from 327.6 million a year earlier.

Total net assets also fell 13% to £211.0 million from £243.1 million.

Like Baronsmead, Baronsmead Second Venture also noted NAV per share rising 2.6% to 62.6p on May 31 from March 31.

Baronsmead Second Venture Chair Sarah Fromson cited similar macroeconomic challenges as suffered by Baronsmead.

‘Against this backdrop, the quoted portfolio delivered strong growth in the last quarter of 2022 as markets recovered from the declines seen earlier in the year. This continued into the first quarter of 2023 with some hopes of inflation and the cost-of-living crisis easing,’ Fromson said.

‘This partially offset the declines from the uncertainty generated by the concerns within the banking sector and recessionary fears.’

Looking ahead, Baronsmead Second Venture echoed Baronsmead in that the investment manager continues to believe in the ‘fundamentals’ of its portfolio.

‘The board expects that market conditions will remain volatile throughout 2023. It is likely that UK inflation will ease - whilst remaining higher than Bank of England forecasts. Nonetheless, there remains a material possibility of recession in the UK,’ Fromson added.

‘However, the portfolio is well diversified, and is largely positioned in sectors of the economy which the board expects will benefit from long-term structural growth tailwinds. Whilst the geopolitical and economic context for the next year is liable to be challenging, experience suggests that investing through the cycle can often produce superior returns. This can also provide an opportunity for the company to make high quality investments and build strategic stakes in businesses with great potential for the future.’

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